ITO 27(1)(5), Mumbai V. SHRI. JASMIN MULRAJ MEHTA, Mumbai

ITA 672/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2998 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 06-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained expenditure
• Section: 69C; 143(3); 133(6); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 672 / MUM . /201 9 ( ASSESSMENT YEAR : 20 09 10 ) INCOME TAX OFFICER WARD 27(1)(5), MUMBAI . APPELLANT V/S SHRI JASMIN MULRAJ MEHTA 12, NAND SMRUTI PLOT NO.15 VALLABH BAUGH LANE EXTENSION MUMBAI 400 077 PAN AACPM4122B . RESPONDENT C.O. NO.13/MUM./2020 ( ARISING OUT OF ITA NO. 672 /MUM. /2019 ) ( ASSESSMENT YEAR : 20 09 10 ) SHRI JASMIN MULRAJ MEHTA 12, NAND SMRUTI PLOT NO.15 VALLABH BAUGH LANE EXTENSION MUMBAI 400 077 PAN AACPM4122B . CROSS OBJECTOR (ORIGINAL RESPONDENT) V/S INCOME TAX OFFICER WARD 27(1)(5), MUMBAI . RESPONDENT (ORIGINAL APPELLANT) REVENUE BY : SHRI ASHISH KUMAR ASSESSEE BY : SHRI MEHUL SHAH DATE OF HEARING 30 .0 1 .2020 DATE OF ORDER 13.03.2020 O R D E R T HE CAPTIONED APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARISE OUT OF ORDER DATED 26 TH NOVEMBER 2018, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 26, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2009 10. 2 SHRI JASMIN MULRAJ MEHTA 2. THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO THE DIRECTION OF LEARNED COMMISSIONER (APPEALS) TO RESTRICT THE DISALLOWANCE ON ACCOUNT OF NON GENUINE PURCHASES TO 12.5%. 3. BRIEF FACTS ARE , THE ASSESSEE , AN INDIVIDUAL , IS ENGAGED IN THE BUSINESS OF SUPPLY AND RESELLER OF ALL KINDS OF INDUSTRIAL FASTENERS LIKE MILD STEEL, HIGH TENSILE STAINLESS STEEL, BRASS, COPPER, ALUMINUM, BOLTS, NUTS, WASHERS, STUDS, EYE BOLTS, CAPS CASHE NUT, ETC. THROU GH HIS PROPRIETARY CONCERN MEHTA ENTERPRISES. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED HIS RETURN OF INCOME ON 25 TH SEPTEMBER 2009, DECLARING TOTAL INCOME OF ` 3,77,680. ASSESSMENT IN CASE OF THE ASSESSEE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 23 RD DECEMBER 2011 DETERMINING THE INCOME AT ` 4,63,557. AFTER COMPLETION OF THE ASSESSMENT AS AFORESAID, THE ASSESSING OFFICER RECEIVED INFORMATION FROM THE SALES TAX DEPART MENT, GOVERNMENT OF MAHARASHTRA THAT PURCHASES WORTH ` 21,76,808, CLAIMED TO HAVE BEEN MADE DURING THE YEAR FR OM FIVE PARTIES ARE NON GENUINE. ON THE BASIS OF SUCH INFORMATION THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE AC T. FROM THE MATERIAL ON RECORD, THE ASSESSING OFFICER FOUND THAT THE CONCERNED PARTIES FROM WHOM THE ASSESSEE CLAIMED TO HAVE EFFECTED THE PURCHASES HAVE BEEN IDENTIFIED AS HAWALA OPERATOR S BY THE SALES TAX DEPARTMENT, AS THEY WERE ONLY PROVIDING ACCOMMODA TION BILLS WITHOUT 3 SHRI JASMIN MULRAJ MEHTA ENTERING INTO ACTUAL SALE TRANSACTION. THEREFORE, DURING THE ASSESSMENT PROCEEDINGS HE CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHASES CLAIMED TO HAVE BEEN MADE THROUGH PROPER DOCUMENTARY EVIDENCES. FURTHER, TO INDEPEN DENTLY VERIFY THE GENUINENESS OF PURCHASES, THE ASSESSING OFFICER ISSUED NOTICES UNDER SECTIO N 133(6) OF THE ACT CALLING FOR CERTAIN INFORMATION. AS ALLEGED BY THE ASSESSING OFFICER, ALL SUCH NOTICES RETURNED BACK UN SERVED. THOUGH, THE ASSESSEE FURNISHED PURCHASE BILLS AND SOME OTHER DOCUMENTS TO PROVE THE PURCHASE, HOWEVER, THE ASSESSING OFFICER DID NOT FIND THEM CONVINCING WHILE OBSERVING THAT THE ASSESSEE FAILED TO FURNISH VITAL EVIDENCES LIKE DELIVERY CHALLAN, TRANSPORT BILLS, ETC. THUS, ULTIMATELY, TH E ASSESSING OFFICER HELD THAT PURCHASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE ARE NON GENUINE, HENCE, HAS TO BE TREATED AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT. HAVING HELD SO, THE ASSESSING OFFICER PROCEEDED TO MAKE THE ADDITION OF AN AMOUNT OF ` 9,41,205, ON PEAK BASIS. THE ADDITION MADE BY THE ASSESSING OFFICER WAS CONTESTED BEFORE THE FIRST APPELLATE AUTHORITY. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD, LEARNED COMMISSIONER (APP EALS) DIRECTED THE ASSESSING OFFICE R TO RESTRICT THE DISALLOWANCE TO 12.5% OF THE TOTAL NON GENUINE PURCHASES. 4 SHRI JASMIN MULRAJ MEHTA 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , IN COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF PURCHASES BY FURNISHING DELIVERY CHALLAN, TRANSPORT BILLS TO SHOW THE ACTUAL DELIVERY OF GOODS. FURTHER, HE SUBMITTED , THE NOTICE S ISSUED UNDER SECTION 133(6) OF THE ACT ALSO RETURNED BACK UNSERVED THEREBY RAISING DOUBT REGARDING EXISTENCE OF THE SELLING D EALERS. THUS, HE SUBMITTED , IN SUCH CIRCUMSTANCES, LEARNED COMMISSIONER (APPEALS) SHOULD HAVE SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER. 6. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE FACT THAT THE ASSESSING OFFICER HAS NOT ADDED THE ENTI RE PURCHASES BUT HAS MADE ADDITION ON PEAK BASIS , TO SOME EXTENT , PROVES THAT THE PURCHASES ARE GENUINE. FURTHER, HE SUBMITTED , CONSIDERING THE FACT THAT THE APPLICABLE VALUE ADDED TAX (VAT) RATE IS 4% AND THE ASSESSEE HAD ALREADY DECLARED GROSS PROFIT OF 5.5%, THE DISALLOWANCE @ 12.55 WOULD BE HIGH AND EXCESSIVE. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THOUGH, IT MAY BE A FACT THAT THE ASSESSEE HAS FAILED TO FURNISH DOCUMENTARY EVIDENCES TO THE SATISFACTION OF THE ASSESSIN G OFFICER TO PROVE THE GENUINENESS OF PURCHASES, HOWEVER, IT IS A FACT THAT THE SALES EFFECTED BY THE ASSESSEE HAVE NOT BEEN DOUBTED. FOR THIS REASON ALONE, THE ASSESSING OFFICER HAS NOT DISALLOWED THE ENTIRE 5 SHRI JASMIN MULRAJ MEHTA PURCHASES, BUT HAS ADDED ON PEAK BASIS WHICH HA S BEEN REDUCED TO 12.5% OF THE NON GENUINE PURCHASES BY LEARNED COMMISSIONER (APPEALS). AT THE SAME TIME, ASSESSEES CONTENTION THAT NO ADDITION AT ALL CAN BE MADE IS NOT ACCEPTABLE CONSIDERING THE FACT THAT HE HAS FAILED TO PROVE THE SOURCE OF PURCHASES T HROUGH COGENT EVIDENCE. THEREFORE, AFTER CONSIDERING ALL THE RELEVANT FACTS AND MATERIAL ON RECORD, THOUGH , WE AGREE WITH THE LEARNED COMMISSIONER (APPEALS) THAT DISALLOWANCE HAS TO BE MADE @ 12.5% OF THE NON GENUINE PURCHASES, HOWEVER, THE ASSESSEE SHOULD GET BENEFIT OF THE GROSS PROFIT ALREADY DECLARED. IN OTHER WORDS, THE ADDITION ON ACCOUNT OF NON GENUINE PURCHASES SHOULD BE RESTRICTED TO 12.5% LE SS THE GROS S PROFIT ALREADY DECLARED BY THE ASSESSEE. 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED AND ASSESSEES CROSS OBJECTION IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN C OURT ON 13.03.2020 SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 13.03.2020 6 SHRI JASMIN MULRAJ MEHTA COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI